Multi Baggers

Hem Securities

12.00 AM Aug 26th 2013

Ipca Labs

BSE ID : 524494 NSE ID : IPCALAB

RECOMMENDED PRICE623.30

PEAK FROM RECO906.90 45.50%

CURRENT PRICE544.00 12.72%

Ipca Laboratories is vertically integrated and produces finished dosage forms and Active Pharmaceutical Ingredients. We initiate a 'BUY' on the stock with a target price of Rs 780 with the medium to long term investment horizon.

Ipca Laboratories

Ipca Laboratories is vertically integrated and produces finished dosage forms and Active Pharmaceutical Ingredients. Exports to over 120 countries, now account for nearly 61% of its income.

The company has posted highest strong quarterly performance for the quarter ending June 2013. The Revenues from operations on consolidated basis increased by around 26% at Rs.805.56 crores vs Rs.637.61 crores y-o-y. Operating profit jumped about 21% at about Rs.171.02 crores as against Rs.141.78 crores in the previous quarter. Overall R&D cost in this quarter was around Rs.35.16 crores which includes about Rs.3.14 crores of capital expenditure and Rs.32 crores of revenue expenditure. As a result of it operating profit margins declined about 101bps at 21.23%. The net profit skyrocketed by 67% at Rs.71.77 crore for the quarter as compared to Rs.42.98 crore. EPS for the quarter stood at Rs.5.69. The company incurred a capital expenditure of around Rs.47 crores in the quarter.

Total revenue from formulations business grew by 29% at Rs.580.31 crores as against Rs.448.69 crores in Q1FY13. Revenue from domestic branded formulations grew by 12% at Rs.250.36 crores from Rs.224.18 crores y-o-y and export formulations revenues surged sharply by 47% at Rs.329.95 crores vis-à-vis Rs.224.51 crores.

Revenues from API moved up by 17% at Rs.212.22 cr. as compared to Rs.181.56 cr. in Q1FY13. Domestic API revenues grew 16% at Rs.45.63 cr vs Rs.39.34 cr. y-o-y. Export API revenues jumped by 17% at Rs.166.59 cr. from Rs.142.22 cr. in Q1FY13.

Valuation

With robust product pipeline, increasing market share in key products; revival of ani-malaria segment revenues; Ipca Labs Ltd. revenue stream looks visible. Approval of Indore SEZ would be a growth driver in near term. We believe the company is trading at an attractive valuation at 17.21x and 13.95x of FY14EPS of Rs.36.21 and FY15EPS of Rs.44.68. We initiate a 'BUY' on the stock with a target price of Rs.780 (appreciation of about 25%) with the medium to long term investment horizon.

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